ORGANIZ/fIION DE\\IELOPMENT 4t XieS&r& L:rlt ttttrc DONALD R.BRO\\MN i',ii+ir+,::':i'i Organlzation Renewal: The Challenge-of Change LEARNING OBJECTIVES Upon completing this chapter, you will be able to: '1. Recognize the factors contributing to the accelerating rate ofchange. 2' 3. 4. Identify the ways an organization uses renewing processes to adapt to change. Determine the individual and group methods of coping with change. Understand and apply the sociotechnical-systems approach to OD. PREMEETING PREPARATION 1. Read Chapter 2. 2. Read tfe li::::,:"j:,1?:9?:[111._sjlulation !.r,.pe]ore comins ro ctass, comptete part A, steps 1 and which includes completing the Profile Survey, Profile rorr, Crrsi performance Form, Familiarize yourself with the "lnstructions foi Developing oo practitioner Roles and skills,, at the end of the simulation. #Atjrrffi."?ff: 3. Read and prepare analysis for Case: The NoGo Railroad. THE CHALLENGES OF CHANGE Change is the name of the game in management today. Market, product, and competitive conditions are rapidly changing. Under these pressures, organizations are changing. They are downsizing, reengineering, flattening structures, going global, and initiating technologies that are more sophisticated. Howev"r, -ur1i organizational changes, such as downsizing, often have unintended effects or consequences on the productivity of individlal i,ork units.l a" trrE changes, organizations must adapt if they are to be successful. For examp6, throu-gh changing times, 3M has "nuironment keep its creative managed to spirit alive' The company is consistently in the list of top 20 in rovatire companies in the world inthe BusinessWeek-Boston Consulting Group ranking.2 Almost everyone now uses Post-It notes, yet they were aa accidental discovery of 3M scientist Art Fry, who became the product champion for Post-Its. The outcomi is a big company that still manages to develop new products faster than its competition. The reason: Commitment to innovation una iuc{ of corporate rules leave room for plenty of experimentation-and failure.3 Renewal organization renewal requires that top managers make adaptive changes to the environment. Strategic models of top manin directing organizational responses to keep pace with changing industry conditions. In ioday,s business environment, more thaa at any time in history, the only constant is change. grrirr"r, consultant and author Jim Collins wrote in Fortune, "Companies do not fall primarily because of what the world does to them or because of how the world changes around them; they falt first and foremost because of what they do to themselves.,,4 The fact is that managers will have to become masters of change and renewal to be effective in the future. The changes facing management in the twenty-first century are likely to be even more dynamic and challenging than in the past' Therefore, the focus of organization development is on changing organizational systems, stressing the situational agers play a crucial role Chapter 2 ' Organization Renewal: The Challenge of Change ree of problems and their system-wide impact. In solving a given problem, managers must dyze the organization, its departmental subsystem interrelationships, and the possible effects r fte internal environment. This approach, termed the systems approach, provides a way of analyzing, and solving problems in organizations. The systems approach, then, is rrcmed with relationships among departments and the interdependencies between these elerrorts and the external environment. The changing conditions that face organizations can be seen in the sudden decline in the wing machine market compared to the projected increase in the cell phone market. After thger N. V. (the Singer Company) came out of bankruptcy, it had to reorganize, sell off unprofit* units, and change the marketing strategy because the number of people buying sewing mtines had declined drastically. Meanwhile, the market for smart cell phones, virtually nonexiircni a decade ago, today constitutes a several-billion-dollar market. &erving, (grstant Change Dcsause of the rapid pace of technology, firms are confronted with the early technological obsobeace of products. In the past, companies could grow dtrring the long lifespan of a proprietary but today their innovations are often quickly overtaken by competitors with lechnoThese problems are the result of the increasing rate of change and are mde more difficult because of the impact of future shock on management. Managers today face mirt situations unlike those of the past, and in an era of accelerating change, managerial excelk derives from the ability to cope with these changes. Organizations either become more Stive, flexible, and anticipative, or they become rigid and stagnant, reacting to change after ffi frct, often when it is too late. Seldom can managerial decisions be based solely on extrapola' - of historical experience. Many decisions are unique, innovative, and risky, involving new mas of opportunity. Putting a new product or a new process into production is a major business htion, tlupal improvements. ,&sision. Organizations exist in a changing environment and, therefore, must have the capacity to eip- As Apple Computer's evangelist for the Macintosh, Guy Kawasaki was one of the driving ffimes behind a revolutionary new product. Kawasaki's first rule: If you want to make a revolutur vou have to start by unleashing revolutionary products and ideas. You have to "create like Gtil; b,rt thinking differently is just the first step.s Business revolutionaries (or change agents) ,dm have to keep rethinking-and just as important, they have to keep doing, if they are to tum Efical ideas into real accomplishments' In the previous chapter, a model for five stages of the organization development process mos described. Stage 1 of this model is to anticipate a need for change and is depicted in rose 2.1. In this chapter, we will concentrate on the first stage and examine the way managers rangmg. ; global, g, often ;, organ- creative -Boston scientist ,lop new oom for op manL today's rhor Jim how the rre. The m il the uational mnE 2.1 Stage'l of Organization Development's Five Stage ) 33 iA Pat 1 . Anircipating Change react to the accelerating rate of change. The pressure of future shock results in new perspect for management strategies and decisions. Managers musf-\\ more than just react: they must able to antioipate the ehanging patlems of people, markets, pfoducts, and technology. Five ar will be covered: l, Or ganization renewal, 2. The systems approach. 3. The sociotechnical system. 4. Future shock. 5. Organizational transformation and organization development. ORGANIZATION RENEWAL: ADAPTING TO CHANGE Managing effectively is a major challenge facing organizations today.6 When an organizat fails to change, the cost of the failure may mean its very survival. Because the environment composed of systems outside the immediate influence of the organization, the organization adapt itself to these forces by introducing intemal changes that will allow it to be more effectj Herb Kelleher, founder of Southwest Airlines and currently Chairman Emeritus, was asked in interview with Fortune how one could renew a big organization. He replied, "The way that accomplish that is that we constantly tell our employees . . . think small and act small, and we' get bigger. Think big, be complacent, be cocky, and we'll get smaller."T To be successful, orgar izations must develop a managerial style and culture that can adequately handle the and opportunities they face. A management style that was adequate under one set of conditi may become progressively less effective under changing circumstances. The OD practiti then, is ultimately interested in changing human behavior and organizational processes to a more adaptive and flexible organization. Organizational renewal is important. If a company is to survive in an increasingly compe itive marketplace, the organization must continuously adapt to its environment; without management cannot maintain excellence. Organizational renewal may be defined as an ing process of building innovation and adaptation into the organization. Google, for example, e courages innovation by letting engineers spend about 2O percent of their time in projects than their primary job. CEO Eric Schmidt explains why he thinks this model works: "I think it cultural. You have to have the culture, and you have to get it right."8 See OD Applicatior Google's Culture. A dilomma with renewal is that stability is necessary but is also the major obstruction change. For most organizations, it seems, the more effective they have been in the past, the likely they are to resist change. Entropy is a principle of physics according to which eYerythi that is organized will break down or run down unless it is maintained. Organization then, is an approach to preventing corporate entropy. Why is change so difficult? Possibly because the culture of the organization becomes a pa: of the people who perform the work. In changing these old patterns, people must alter not onl their behavior but also their values and their views of themselves. The organization's procedures, and relationships continue to reinforce prior patterns of behavior and to resist new ones. As a result, organizational change sometimes results in upheaval and dissatisfactj and possibly even in resignations, dismissals, or ffansfers. Consequently. an organization develop an adaptive orientation and management style that is geared to its environment. agers in different organizations deal with sifuations that may be dramatically different. Some ganizations exist in relatively stable environments, whereas others operate in highly dy settings. Each requires a different orientation to the environment. Approaches to Change Every organization must have erlough stability to continue to function satisfactorily and still vent itself from becoming too static or stagnant to adapt to changing conditions. Both stabi and adaptation are essential to continued survival and growth. An organization that operates in a mature field with a stable product and relatively few petitors needs a different adaptive orientation than a firm operating in a high-growth ma among numerous competitors, and with a high degree of innovation. The former operates in an vironment that is relatively stable, whereas the latter faces a more dynamic and turbulent set Chapter :rsctives mllst be t\\-e areas 2. Organrzation Renewal: The Challenge ofChange 35 OD Application: Google's Culturee 4. 5. 6, -: CEO Eric Schmidt. ln practice, howeve6 it is run by a triumvi- 7. --.:(fromtheLatin triumviratus, meaning "baardof three"). 8. -:-:nidtisjoinedindecision-makingresponsibilitiesbycompany 9. --e company is Google, its product is a search engine, and it still -:3rates under lhe same freewheeling managerial style that it -.'ied with. The company is managed by its designated grown- Democracy on the Web works. You don't need to be atyour desk to need an answer. You can make money without doing evil. Theres always more information out there. Theneedforinformationcrossesali borders. Youcanbeseriouswithoutasuit, -:'l:.;nders Larry Page and Sergey Brin. Schmidt is a seasoned 10. Great just isn't good enough. -:-:ager from Sun Microsystems and Novell. a worldwide marketplace full of competitors' Gooqle cEo Schmidt was hired in 2001 to provide experienced - -. y'th breakthrouqh innovations' Brin savs' "l'v.e seen :=:ership, He handles rhe day-to-day sruff. Dd;;;;-;; i:llaintain obsessed with competition' sav' with Mitroso{t' that --:r three-way discussions between schrnidt, :1liZiXt1Ofl :'rnent i: ,ar]l must :Jective. r.aal in an lhat we r:Ii \\,Ve'li . . organ:rllenges .:rditions -,itionel'. t.;;,;;;';;;;. -=-.ard Business schoor professor David votfie sais'of"a;;i;, ' nuttipte people are making decisions, decisiJ;r"l;;;;; -::-s," saysSchmidt. Headds. := ='cunder-driven company," Executives at Google keep a "Top 100" priority list, and - : -:eers rarely tell engineers what project to *or['o,i, ,rti*6, .olnpei:;newal. ;11 O11$O- - -r create :lple, en.-is other ,nir=rk it's icatign: -Jtion tc ha nrore :ivthin-s ralrewal. .:\\ a paf i lroi onh '.:'11ctu{'e. :sist the .:ectior-t. , ,il illusi -.,. Man, -,me -'' OL- namic :till pre.iebilit) :1', COm- :ltarket. .ll an en- I'i set of :i.b,l:uutt crash into a tree headthev're so distracted lf I had one magic bullet' I . ultimatelyonepersonhastomake.'o-.,r,tX:: y::ldi''spenditonacompetitor'l'dspendittomake.sure -jr: .- -- ,- -, -^''dt responds ihat the consensus-management structure at we're execuling as weii as we possibly tan. I think we're doing a . :.:.::^:,,^,:;- "'-' prettygoodiob'" :::q;ecanbemaddeningattimesbutitisutt*.tiru,a""'r.*.i -^^r^r-^r^-.. The outward immaintains itsfocus and strategy' rL;^..+... ;, :-:sident for technotogy and Page is president f";;;;; -, -- ^Google plaving in a sandbox belies the seriousness and of kids ',: :ry ro run as a group, because partnerships *rk; #;#;;f-"-t.:i:n of the people at Google' At lunchtime' emplovees "l'vetrieduerynur*iJ1,;;;;it :-:-:ersmigratetoprojectsthatinterestthem.rhiionrr"[.i-- = ri iype of strategy forms fluid working groupr',h; .li"[it :-.rj or months, but ir is rough on ptanners. Engin;;;; ;;;H ,-::-'agedtospend20percenrof theirtir"*o.r.ili;;;; : - 'Esearch prolects, no matter howesoteric..d;;;.;; iil . ::Tlnitt in their rearview mirrorand keep looking ---,jr says, "tt has always been a small team "f;."pl;;; n new idea, typicaily not understooa nv p.Jpru:;";;; -=- i.d therr executrves. [This is] a systematic *-a-y? ffiiil ':.: -"-ioaiu"*;;;;;;r-s nor eriminate urat rnif,ia,i""]; ,i :: :-esroent says, "We're encouraging creativity r^d"*i"r",.'g --:_i ' The three executives maintain *rat cooglei fffiilH -: =-g,neering culture is not a liabiirty but un urr.i r;il;i;; '-aikabout is how we ean artract and deveroi til;;;;;; "=. . .--="says Schmdr . culture' and wi{h l*:-f^y:'l]'^1,:: ::- _::, -":. -::"9]t^l:,::^Yi1':-- aole to maintain its culture' even with ' *"1f:::.:l:^t:l ,-1. .l: .no .,^*^^!oon'" companies were sleeping while Brin and Page were tsoth,i!:3' new wavs to build an efficient' effective search 1:l:1"^o'tn and Page came up with a breakthrough search Brin :]s^i:: and then put tosether about '10'000 servers to build :ln^::'ll* theirownsupercompute'' ^,,^*^ ^^ . ^,,*k^. ^{ tronts lt continues to innovate on a numher ot {. -^^.,^!ooo'" and wavs to attain,rev- :::llY^-:Y:t::fl:'search.abilities the searches But it is also building new lines such as ::::^f" online-productivity software and a cell phone' this intensitv is {or a piece of the lnternet search busi^^-- l" has recentlv become obvious' "Search is the kev to the l9-tl-,1' [:3:[%,,H;:;:i]f Jil::; ",.,:._ n'*i*ur. GooE}e has revoturionized$?[:lJ*]i;T:,1f:: the way the worro }inat ' -',,, = ::i:'.%:'::".:,$i"H'|t 'I:.::]v chow down on {ree food and pay little attention to Page as he passes by on skates' This is the same group of engineers that will still te- around that evening working in groups or writing computercode Theyemrtanextremesenseof urgency less than Microsoft and is under siege from iii"or "*, and peopte now took for rhings previousry considered ffHlffi[[;il:ll':J::: :SlflS,"'m::f:li:rui,:Xi::.:,f *.*tl*:.lj ii'rs emplovee a hands-on '-: :=rnions with each an important part in Googles tuture ^c:,iij'l1l:: : :-, -^e realizes they are ;;;;;ryr Though no search engine can do this to date, -:" -"rX;^; that Google and its competilors are commitied ;;;I;;;;; ;.;;;;;;;;;-.;;; -:-=:! rhis is evident ar rhe weekty TGtF meetinis il;r;;;: i:.:i::,1Yt --= . iiee to ask Page ar Brin quustions. "tlobJdy works the oeveloplng' . : ,',i do. The Google culture makes sense if you're in it, and :=-se i{ you're not in it," says Schmidt. :ar: of the Google culture is its "ten things," which is the . . - -.-!'s list of ten things it has found to be true: ,, -- 1 :=.us on the user and all else will follow. 2. :: best to do one thing really', realiy well. r- :.si is better than slow. ' ,. :ts. -A. Questions 1. Do you think Google will be able to maintain its controlled-chaos type of culture? Support your position. 2. Research Google to determine if it has been able to maintain its culture.strateEy mix and remain competitive. Google's Web site {or corporate inforrnatron is www. goog le.com/about. html. stable environment is characterized by unchanging basic pioducts and services, a - - :.,;i of cornpetition, a low level of technological innovation, a tbr\\ialized and centralized -. -'--:. .,nd a slow. sleady rate olgrowth. Such an environment remains relatively stable over '- ::-,-rds. -- hrperturbulent environment, on the other hand, is characterized by rapidly changing -ines. an increasing and changing set of competitors, rapid and continual technological ' :--: to 36 Part 1 ' Anitcipating Change Hyperturbulent 1 I Environmental Stability I I I Stable Lowi[?lii,i"--->Hish FIGURE 2.2 Model of Adaptive Orientation in Organizations the idea of change is clear' irmovation, and rapid market growth. For today's organization, yesterday's accomplishments sraric organizarion can.ro longIr survive. "T"r* ll1rl:,1a: To survive, organizations mt vironment of rapidly advanciig markets, products, and lifestyles. must recognize when it is necessary devise methods of continuous s=elf-renewa1. Organizations l change,andtheymustdeveloptheabilitytoimplementchangewhenneeded.Tomeetthesecc whose primary purpose is the imp ditions, many companies have created sfecialized OD units programs to help the organizati mentation of organizational changes. These units develop new a stable identity, so that change is I improve its adaptation to its environment and maintain overwhelming. A Modet of AdaPtive Orientation gradual change has been receiving much The topic of transformational change as opposed to of incongruence is reached' tention. Some organizations resisichange until a ciitical state orientation in adapting to chat which point change occufs. An illustration of an organization's represents the degree of change in is illustrated in Figure z,.i.to on" dimension in the figure the degree of flexibility present in its i organization's environment, and the second lepresents dimensions, and the many possit ternal orientation. Organizations can vary greatly on these adaptive styles. In addition, organizal combinations of these orientations can lead to different of the orientations used by mana operate on a continuum or blend of the orientations. Several are described next. Low Sluggish-Thermostat frflanagement (Stable Environment' ,.Sluggish-thermostat management" is a term originated by David lVliller to describe < trade-offs favor it.1l This term is a good metaphor tions that resist change ,rniil "ort they become insensitive to change' many organizations set their thermostats so low that on lorv Sluggish management refers to a managerial style based 'tU' Y:1111T::t::1 and control. Typically, organizations that utilize slug of structure cedures and a high degree centralized management have very tiuUf" gouft and a highly :t*"*t":]rll:::"':::-':^] fc of superiorc to subordinates, and an emphasis upon more managerial levels, a t igrr""r rutio tradition, to keep on doing things as they control systems. There may f,e a tendency to value performance, and to be averse to acceptmg always been done, to value seniority more than ideas.Althoughthisisalow-riskstyleofmanaging,itmayleadtoseriousproblemsinthe management and inability to meet new run. Referrin! to Ford Motor Comfany's sluggish r".-* Ford CEo ,uia, "w" learned that there's no market for lousy cars: ffi;;;;.* tested it."12 of entropy' For some Without change, organizations may succumb to the forces from success. These organizations become tions, slowness to adapt ,i"-, no, from failure but the des for competing remaint victim of their own success. In the auto industry, for example, i i Chapter She 2 ' Organization Renewal: The Challenge of Change rame for around 60 years, and the assumptions about customers, markets, and suppliers re- zarqrred valid. 5*isficing Management (Stable Environment, High Adaptation) Seidcing management, aterm related to the word "satisfactory," is management that is ade,ryree and average. It is a style of managing that emphasizes a more centralized decision-making ilEiicil11e with problems referred to the top. Because of the stable environment, there tend to be nnrre ler.els of management, with coordination done by formal committees. Planning and deci*ru:g, making are usually concentrated at the top, with high clarity of procedures and roles' flrnge is accomplish ed at atate that is "good enough" to keep up with the industry, but certainly well behind the state of the art. Company financial statistics, such as retum on investment and roryriol'ee tumover, are commensurate with industry averages. Such organizations often tend to .Ecepr strategies that are "good enough" because of the low level of pressure for change from the rnri1onment. Eighty-two percent of the respondents in a study reported that without change they mqcrld gradually suffer a decline in performance.l3 " Feactive Management (Hyperturbulent Environment, Low Adaptation) u&.Eanizations that have a :ar. A m en- must rry to : connple- ation s not h atd, at ange man s insible iions rgers on) low level of adaptation but exist in a rapidly changing environment ml ro deal with problems on a short-run, crisis basis. Reactiye management refers to the style of reacting to a stimulus after conditions in the environment have changed. It is a short-term, crirB, ilpe of adaptation, often involving replacement of key people, hasty reorganizalion, and dras- of personnel and product lines. The reactive approach to change implies waiting until serious problems emerge that can no longer be ignored and then taking drastic and corrective &sures. A maior food corporation, for example, was feeling the pressures of changing business cmdirions, losing momentum, experiencing product failures, and reporting decreased eamings. T'he new chief executive instituted some massive changes, including a major managerial reorgan,.r:rion, a company-wide efficiency drive, cutting salaried personnel by 10 percent, and taking a rien'hard look at the firm's marketing programs. In another example, the Securities and Ex:h.:nge Commission (SEC) has been criticized for sitting on the sidelines while corporate scanirls wre being uncovered by New York's attorney general. The SEC chairman said in 2003, -The commission has found itself in a position of reacting to market problems rather than anticp@ring them."l4 The Wall Street Journal reported, "Chief among the flaws of the SEC is a reacjt'e culture that often fails to identify danger ahead of time, leaving the agency to respond after ilhers expose problems."ls In late 2008, the reactive culture at the SEC had changed little, as reported again inthe Walt Street Journal.16 This time the agency's inspector general said that the SEC failed to "vigorously" enforce securities law during the two years before the start of the l0O8 financial and banking crisis. g,* cLitting Renewing/Transformational Management (Hyperturbulent Environment, High AdaPtation) lave Organizations that exist in a hyperturbulent environment must not only respond to change, they must proactively take advantage of new opporlunity and innovation. These organizations tend to frt the renewal/transformational orientation and to be champions of innovation; they are faster at ,Jeveloping new ideas, more responsive to competitive changes (a more sensitive thermostat), and more participative in getting the commitment and involvement of organization members in rhe renewal process. Organizations with a high level of adaptation existing in a rapidly changing mal environment tend to utilize the renewing managerial style. nza- tuse progish tave new ong )us- we 'va- lea ned Renewing/transformational management refers to introducing change to deal with furure conditions before these conditions actually occur. Examples of renewing management rnclude the innovations of corporations like General Electric (GE), 3M, and IBM, which have all actively initiated programs of innovation before conditions became critical. IBM has a program it calls on-demand computing that could transform the information technology industry. It will offer computing power to corporate customers as a service, whenever and wherever they need it. IBM's current annual budget allots $1.6 billion to research and development for on-demand products. The CEO, Samuel J. Palmisano, says, "IBM has a history of making bold moves in unsettled times. You don't make bold moves when there's stability because you're not going to 37 38 Part 1 . AnitcipatingChange capture any great advantage."l7 A renewing management orientation has both the ability and need to respond to a hyperturbulent environment. Most modem organizations are increasingly finding the need for this adaptive orientation. Change can provide new opportunities for growth or an increase in the state oforganizational entropy-inability to change. The renewing or transformational manager is constantly fighting entropy and proactively building for the future. Today, organizations need to develop a renewaVtransformational orientation if they are to maintain a competitive edge and even to survive. THE SYSTEMS APPROACH: FINDING NEW WAYS TO WORK TOGETHER The systems approach to managing change views the organization as a unified system composed of interrelated units. This gives managers a way to look at the orgarization as a whole and as a part of a larger extemal environment. In an organization engaged in downsizing, managers may use a systems approach to determine how to cut costs. One approach, the horizontal corporation, breaks the company into its key processes and creates teams from different departments to run them. It's about managing across, rather than up and down. This suggests that managers can no longer function within the traditional pyramid organization chart, but must integrate their department with the goals and shategy of the whole organization. To accomplish this, managers must communicate with other departments as well as with employees and customers. By using a systems perspective, a manager can maintain a balance between the needs ofvarious units ofthe enterprise as well as total system goals and ob- jectives. Downsizing, alone, does little to change the fundamental way that work gets done in a corporation. To do that takes a different organizational model: the horizontal corporation. Some of America's corporations, from DuPont, Cisco, GE, and W L. Gore, are already moving toward this idea. In the quest for greater efficiency and productivity, they are beginning to flatten the hierarchical organization charts that have defined corporate life. The trend is toward flatter, more adaptive organizations. Some of these changes have been under way for several years, such as total quality management, reengineering, and process redesign. The Organization as a System some purpose or goal. Organizations are systems. Every organization can be viewed as a number of interrelated, interde- A system is a set of interrelated parts unified by design to achieve of which contributes to total organizational functioning and to the achievement of the overall organizational goal. The systems approach is one of the most important concepts in OD because it deals with change and interrelationships in complex organizations. The notion of system interdependency is critical because a change in one part of an organization system has consequences in other parts of the organizatron. When Mark Hurd initially became CEO of Hewlett-Packard, he recognized this concept in an interview he gave to the NewYorkTimes, saying, "We'll look at the entire enterprise" in reference to any changes that he pendent parts, each might make.18 A system is "an organized unitary whole composed of two or more interdependent parts, components, or subsystems and delineated by identifiable boundaries from its environment."l9 The term is used in many different contexts: for example, defense system, weapons system, solar system, and eco system. Systems have several basic qualities: . . . . . A system must be designed to accomplish an objective. The elements of a system must have an established arrangement. Interrelationships must exist among the individual elements of a system. The basic ingredients of a process (the flows of information, energy, and materials) are more vital than the basic elements of a system. A system's overall objectives are more important than the objectives of its elements, and thus the narow objectives of a system are deemphasized. From an organizational perspective, the systems approach recognizes and focuses on the effect of managerial functions and the interrelationship between subelements of the organization. L_ L- Chapter 2 . Organization Renewal: The Challenge of Change .lity and easingly tgaflizanstantly develop even to THER )mposed and as a rers may orporaments to d organ- hole or- well as in a bals FAJRE 2.3 The Organization as an Open System and ob- in a cor- Some of r toward n the hi er, more such as than view the organization as a static set of relationships, it views the organization as a set aspects. The of inputs and outputs is a basic starting point in the description of a system (see Figure 2.3). i;::er :u- iorvs of information, personnel, and material. Time and change become critical i:;r llee basic elements make up such a system: 1. Inputs are the resources that are applied to the processing function. 2. Processes are the activities and functions that are performed to produce goods and services. 3. Outputs are the products and services produced by the organizat\\on- A business firm takes such inputs as materials, people, and energy, and converts them into or services desired by consumers. The organization receives inputs from its environ- rl. Orgainterde- I to the ;t impor- rganiza- llt of an {urd inito the 's that he .\\'e rnt parts, "0 -.1 ment. :m, solar ials) are 3nts, and =-u1ucts Eent. acts on the inputs by transforming them, ald retums the transformed elements to the envirlflment as products. As an example, the resource inputs to a hospital include money, equipment, ::.ined staff, information, patients, and physicians; the outputs include new research, well pa:ents, improved medicine, and trained doctors and nurses. Open Systems Jhere are two basic types of systems: open and closed. A closed system is one that is self:,rnrained and isolated from its environment. In the strictest sense, closed systems exist only in :eory, for all real systems interact with their environment. The open system is by far the most important type of system, and it will be emphasized in r-ir treatment of organizations. An open system influences and is influenced by the environment :;ough the process of interdependency, which results in a dynamic (changing) equilibrium' A rushess organization provides an excellent example of the process of reciprocity and, therefore, :- an open system. The open system is in continual interaction with its environment and, there:-.re. achieves a steady state of dynamic equilibrium. The system could not survive without the :Lrntinuous influence of transformational outflow. As the open system interacts with its environ::ent, it continually receives information termed feedback from its environment, which helps the s.. stem adjust. The departments also interact with one another, because they have interacting ;-sks to perform. Therefore, the overall efficiency of the system depends upon the level and deof interaction with other elements. One of the current trends in OD is a shift toward using a more integrated systems approach :o organizational improvement. The systems approach, then, allows managers to anticipate both :rrmediate and far-reaching consequences of organizational changes. =ee :s on the nization. 39 40 Part I . AnitcipatingChange THE SOCIOTECHNICAT SYSTEM Organization development and renewal may be referred to as a systems approach to change. organization is viewed as an open sociotechnical system20 of coordinated social and techni activities. Organizational functions and processes are not considered as isolated elements but parts reacting to and influencing other system elements. As the social and technical functions interdependent, they need to be jointly optimized to provide the best outcome for an organi tion.2I The sociotechlical system uses the following approaches: l. Orgarize around process-not tasks. 2. Flatten the hierarchy. 3. Use teams to manage everything. 4. Let customers drive performance. 5. Reward team performance. Changes in any one of the organization's processes can have effects throughout the ization, because all processes are related. Therefore, by its very nature, OD seeks to consider interrelationships among the basic elements of the system when changes are planned. The ization can be viewed as an open system in interaction with its environment and consisting five primary components and represented in Figure 2.4. THE GOALS AND VATUES SUBSYSTEM This is the basic mission and vision of the organization. Such goals may include profits, growth, or survival and are often taken from the larger environmenl + + Input-OutputFlow of Materials, Energy, and lnformation FIGURE 2.4 The Sociotechnical System Source: Fremont, E. Kast and James E. Rosenzweig, Organization and Managemenf (New York: McGraw-Hill, 1979, p. 19). l_ Chapter ange" 2 . Organization Renewal: The Challenge of Change nE TECHNICAL SUBSYSTEM This subsystem includes the primary functions, activities, and :Eerations, including the techniques and equipment, used to produce the output of the system. An technical rts but as :tions are STRUCTURAL SUBSYSTEM This is the formal design, policies, and procedures. It is usually .d: :orth by the organization chart and includes division of work and patterns of authority. ln# llDE PSYCHOSOCIAL SUBSYSTEM (CULTURE) This subsystem is the network of social relationir:Irs and behavioral pattems of members, such as norns, roles, and communications. :r-ganiza- le organ- sider the le organ- isting of nization. ronment. * TrC MANAGERIAL SUBSYSTEM This subsystem spans the entire organization by directing, orgleting, and coordinating all activities toward the basic mission. The managerial function is imf,rr,nant in integrating the activities of the other subsystems. One of the earliest applications of the sociotechnical-systems concept was in British coal 'r:'-ring. The traditional "short wall" method utilized small, cohesive work groups working as lrr-ru-rnornous teams. In light of technological advances, engineering efficiency experts deteri:-:ed that the short wall method was inefficient and introduced an improved technical system et=ed the "long wall" method. Unfortunately, the long wall method resulted in lower performurc; and higher absenteeism. Production decreased because the experts had failed to consider rE impact of the changes on the psychosocial system. Researchers found that productivity and r--{:.ele improved substantially when the team approach was restored and team pay incentives ,,::e provided. The sociotechnical-systems OD approach is considered one of the most sophis::":ed techniques, involving large-scale effort and considerable skill on the part ofthe OD be expected with a sophisticated approach, the sociotechnical-systems ap:ru.iiiioner.22 Ar "a.r rrinu-h is more difficult to implement, as knowledge and expertise to implement it is widely dis- ir:=td among diverse gtoups.23 lNigh-Performance Systems !- ::r-rre recent development is the application of the sociotechnical-systems approach in designir:- a high-performance organization. High-performance organizations do not occur by chance or Ir fllicy or decree: they are designed. The high-performance model focuses on five key variables (similar to Figure 2.4) thatneed r :e considered if managers wish to improve performance.24 Th"r" key variables are: 1. The L The 3. The {. The 5. The Ile r, business situation (forces in the environment). business strategy (goals and values). design elements (technology, structure, etc.). culture. business results (the outputs produced). model can be used to identify the real drivers of organizational success used in organization elopment and renewal programs to improve system performance. The Contingency Approach: No One Best Way i,,.rems theory provides a conceptual overview of organizational functioning, but managers re-J to know how the subsystems of their own organization are uniquely related in the organiza::r's specific environment in order to best deal with the organization's problems. Contingency -Lar\\- recognizes that there are differences between organizations, and that what constitutes ef- ':;:ive management in one system may not in another. Contingency views emphasize the charac- 2rgy, m:stics of a specific organization and maintain that to organize and manage a change program, :cd must consider the set of conditions in that particular setting.25 The contingency approach holds that there is no one best way of managing in all situa:rrns. Given certain combinations of contingencies (such as a stable external environment and a ,--; adaptive orientation to change), one can specify general approaches to change that are likely l: :e more effective than others. In other words, the contingency approach identifies various "ifsuggests general directions for change, depending on the situation. The -a" relationships andrelies on certain conceptual skills, such as diagnosing and understanding i;:.dngency approach ::e r arious types of situations that are likely to confront the OD practitioner. The contingency view suggests that managers in different departmental units face situations :sr may be very different on a number of dimensions, including degree of structure, levels of mo.Iion, and potential for conflict. The OD practitioner, then, must recognize that there is no one -*, 41 a. P- I . Anircipating Change best way for all organizations, although some practitioners would take issue with this The contingency approach to OD suggests that the effectiveness of practitioner sfyles, techniques, or strategies is a factor of the circumstances. The contingency variables that need considered and the emphasis they are given will depend on the type of problem being consi FUTURE SHOCK AND CHANGE Alvin Toffler, in the book Future Shock, stggests that most people are utterly unprepared to with the accelerated rate of change. "Future shock is a time phenomenon, a product of a accelerated rate of change in society. It arises from the superimposition of a new culture on old one."27 Future shock-too much change in too short a time-affects managers and zations as well. When change occurs too rapidly, the capacity of management to react is creating the danger of future shock. As a result, managers must become more adaptable and ible than ever before. The world is constantly changing in finance and economics, technology, and social and these changes seem to have accelerated in recent years. In so rapidly changing an env ment, plans are sometimes out of date within three to six months. Changing trends will significant impact on organizations as managers develop new organizational models and novel ways of motivating employees. Changes in finance and economics. The lead sentence in a front-page article in the Street Journal began: "The notoriously fragmented American banking system is through a decade's worth of consolidation in a matter of weeks The worldwide cession that began rnlate 2007 has introduced challenges and problems that previ were not imaginable to most managers. Managers are confronted with new challenges diverse fronts: tighter credit, lack of consumer confidence, higher energy costs, i environmental requirements, making cuts in departments, laying off of employees, perhaps facing their own layoff notice. Managers will need to scan the environment to aware of issues that will have a major impact on their industry or organization. History shown that with economic crisis comes opportunity. Changes in technology. Technological changes have shortened the life cycle of products and services, and when product life cycles are shortened, organizations must come more adaptive by shortening their lead times to get into production. Technologi advances are occurring so rapidly that the education of most scientists is technically lete within a few years after graduation from college. There is so much information professionals operating in narrow fields often find it impossible to keep current on i mation pertinent to their specialties. Changes in social valaes. Society has placed new demands on business firms for soci responsibility, environment-friendly operations, and pollution controls. Other soci changes also affect the organization. In the past, jobs were thought of as tasks to be do not something to be questioned or evaluated. In the United States, more workers earn thei pay in knowledge-based jobs than in skilled and nonskilled jobs. For many years to managers will be searching for newer, more relevant, and more effective ways of managi this increasingly intelligent and sophisticated workforce. In The Future of Managemenf, author Gary Hamel asks the question, "Could the practice of management change as radically over the first two or three decades of this century as it did during the eady years of the 20*r century? I believe so. More than that, I believe we must make it so. . . . Sure, we're bound by precedent, and most of us have a vested interest in the management status quo. But if human beings could invent the modern industrial organization, then they can reinvent it."29 Meetup Inc., a recent Web-based start-up, serves as an excellent example of how fast-changing forces in economics, technology, and society have intersected to provide not obstacles but opportunities. As the world's largest network of local goups, Meetup provides a place where people with similar interests can easily organize a group or find one of the thousands of groups already formed and meet with them face-to-face. But Meetup's success and rapid growth brought about an organization with layers of bureaucracy. Consequently, it was not able to respond quickly to its customers. The CEO discarded the organization chart and replaced it with a strategy in which workers set priorities and picked their own projects. For some workers, the new system felt like chaos and they left, Chapter 2 . Organization Renewal: The Challenge of Change 43 but other workers thrived. The system is still evolving, and a strategy group fbllows how changes and new services affect revenues. With a clearly arliculated "Meetup Manifesto" providing the direction lbr the company, the CEO retains the authority to stop a project headed in the wrong direction.3o An organization must adapt to these changing conditions. Each day brings a new set of conditions, and internal realignment is often required. Product and market strategies need to be more flexible and must depend upon the ability of a company to recognize the need for change. Consequently, marlagement will need to place an increased emphasis on human resource development. An unprecedented opportunity exists for the OD practitioner to apply specialized skills in seeking solutions for these problems of industry. In view of these factors, whether an organization can remain effective is largely dependent upon whether it is sufficiently adaptive to changing conditions. Apple Inc. is an example of a company that over the years has been able to develop new and innovative products. Some of its products, such as the iPod and iPhone, have become the benchmark by which competitors' products are measured. OD Application: Apple and Renewal looks more closely at how Apple is able to do this. ORGAN IZATION TRANSFORMATI ON AND ORGANIZATION DEVELOPMENT There are many ways to respond to the pressures for change. Some responses may be ineffective or even ultimately destructive. Many companies have been driven out of business because of ;ompetitive forces or of unwise financial maneuvers. In this section, we will examine two major approaches to change and present a model of the planned change process. Organization transformation (OT) and organization development (OD) are both approaches to managing change in organizations. Organization transformation (discussed in more detail in Chapter 15) may be defined as the action of changing an organization's form, shape, or appearance, or changing the organization's energy from one form to another, which OD Application: Apple and Renewal3l When ycu review several business magazines, like tensively with his team during the development and has unquestioned authority. A fundamental belief of lobs is that giving customers even more choices and better products will give Appte a rellably profitable and growing business. Jobs' charismatic leadership and idiosynerasies' l. ave .caused some internal problerrs at,Apple. Somewhat legendary ' inr Silicon Valley is his management style that tends toward throwing tantrums and berating and humiliatinE employees whd Fasf {ompan1t, Susrhess Ullaek. and Fortune, Apple 1ne" consistently shows up on their "best" lists. On Eusiness ?Veek's annual list of "The 25 Most lnnovative Companies," Apple is at or near the top year afteryear. And on Fast {ompanys list of iThe Wor}d's Most lRnovative Cornparties," Apple is again near the top. ,ortune has a slightly different [st. "America's,Most Adrnir*d Companies." but Apple again leads this [ist. When all af these 'best" lists,are translated to doliar:s. a much more guanthative rleasure than "innovation" and "most adrnired," Apple is near ?he top once again. Based on the total return to shareholder of turfure 500 companies, Apple ranks number 1 {or the past five . disagree with his ideas. His habit of making, dec,isions and'then . strddenly changing his mind has also heerr cited as part of the reason he is difficult to w*rk for. F*r ihis and AppleS,unusual' structure, a special kind of woik foree is required. COO Tim Cook says that collabotation is key within Apple as there are' year5. Jr;st when some technology analysts are forecasting that vague lines separating departments. , i I Perhaps no other,Clo today is as closely associated with the company thal they head than Steve Jobs, But'in termg of tiere are no moie breakthrough innovations for Apple or they don't have many new products in the pipeline, Apple makes a surprise an0ouncement about a new innovative product. Somefimes, as with the iPod and iPhone, the innovations are based.on existing competitors' productr like MP3 ptayers and cell phones. Bat,the delivery package, quality, and feel, is so unique as to re-l define a produ$ with virtually no competition*and with a premium price. . The question begs as to what Apple does time after time; year after year to be so suc(essful. ln large measure, it is in the culiure defined primarily by Steven Jobs. iobsl vision of "provid. iag ccrnputers as a tool to change the world," h6s helped to de. fine Apple. Johs has,a perfectionrstt approach to product developrnent and an r:nwillingness to a(cept compromises. His dedieation to excellence has created a culture of innovation at Apple. Though Jobs does not design the products, he meets ex- r, ' :strategy afid execution, Tim Cook is crkical to Appleb success. He has been running much of the day-to-day operations since Jobs, brought him to Apple in, I 998, Cook is frequently seen as a' polar opposite to Jobs. While Jobs has,a reputation of being un. predictable and hard to please, Cook is reputed to be cool and soft-spoken. But both Jobs and Cook are per'{ectionists. worka- Questions: 1. : Research Appleis 2. What s,ite is ,,r ,. product history to discover the:progre+ are its newest product innovations? Apple's Web www,app[e,csm1: i :: ,3.'To what'do you attribute Apples ability for self:re*ewal? r /ll Ertf . tircipatingChange transformation tends to focus on unnormally occurs in a brief time interval. Organization to crises and life-cycle considerations' The planned changes from within the system in response quickly. "Transformltional change" is a term oforganization is in such peril that it must change kind of change that is necessary to solve the by President Barack Obama to describeihe ten used Transformational changes ffansform the very problems and challenge. ru"mg the United States. organization development, on the other hand' framework urrd ussrr*ptio* oi an organization. by practrtroners' focuses more on planned changes introduced ThedifferencebetweenoTandoDcentersonthemagnitudeandspeedofthectrlse-'.fr introduced in evolution' oT refers to significant changes is the difference between revolution and As a contrast to deal with survival or crisis-type problems. a short, almost immeoiate time frame time frame on involves large-scale change over a longer between oD and or, ,"" rig"re 2.5. OD extemal environment to survive' The must r"t"T:t *iitr tt a more gradual basis. organizations "ir or market its products' or 10 attract ability to produce factors that interfere *rtfrit .rg*ization's " it needs' become a force for change' the human, technical, ana fnanId resources oD,orplannedorganizationalchange,is.adeliberateattempttomodifvthefunctioningof p*, i, orJ", to bring a'Uout improved effectiveness'32 the total organization or-one of its major and the change will be reierred to as practitioners, The persons attempting a uring about this efforts can aJthe client system. Planned change uig"*witiue 1efeyea.q organization u"irrg "t individual, team, and organizational behavior' folm on Tlts fiRsr sTtiFfe A stffi##nnw8laf{r reHJdr&3N l'@fiA*4. r5r T{? ffiJfie'1r"gEt fr f,g dF*f* StthttlAfi{l' W6r*r-ffier& rffifiY 54.pq*r!v p#t...-.' M ffi M @ OT ls Similar to a Crash Diet lnc' by permission of Johnny Hart and Creators Syndicate' Source:B.C. FIGURE 2.5 Chapter 2' Organization Renewal: The Challenge of Change Hfividual Effectiveness member has unique values, beliefs, .ilnorganization is made up of individual members, and each style of top management and the norms, values, and beliefs of d motivations. The leadership organization's L organization's members combine to form the organization's culture. Angoals and at theeffecsame creating a culture that achieves organizational -Gness can be increased by make lhe satisfies members'.,eeas. fmpowering the individual employee by letting workersof em&rkions can often improve quality, productivity, and employee commitment. Recent use suggests that p*erment in companles Hke Southwest Airlines, Costco Wholesale, and Google. human potenLpo*"ring employees pays off. Managers who can find the key to unlocking the enefgy. t'elof their employees will be able to tap an immense source of productive on individual effectiveness range from empowerment training that focus Change "ffo.t, activto high-powered executive development pfograms. These include empoweflnent Fograms abilities, or motivational levels of organization members' il designed io i-prou" the skills, competence' fhe goals are improved managerial and technical skills or improved interpersonal be directed toward improved leadership, decision making, or probSuchlhange efforts may also h solving among organization members. The assumption underlying such efforts is that develorganization. c4ing better managers and employees will make for a more:effective Eam Effectiveness (hange efforts may also focus on the fundamental unit of an organization, the team or work g"d as a means ior improving the organization's effectiveness. Today, we are in the midst of Hewlett-Packard, Harleyrwolutionary changes in how people are managed in organizations. are moving toward what are called "selfDavidson Motor Comp*y, u.rd other organizations approach is that managed" work teams (see chapter 13). The premise of this emerging if it is to achieve a sustainable competuganizations must elicit the commitment of its employees problem-solving itiie advantage in a turbulent marketplace. There is an emphasis on improving conflicts and issues surrounding ways the group can improve Irocesses wh--ile working through its effectiveness and productivity. may focus on These activities are designed to improve the operations of work teams and works' and the quality of retask activities, what the team does, or team process, how the team organization, and more lationships among team members. work teams are the primary unit of the teams may increase work moeffective teams can lead to improved organizations. More effective tivation, improve performance, and decrease tumover and absenteeism. As we One iechnique that is often used in examining groups is called process observation' may be identified: observe and analyze work groups as systems, two separate dimensions 1. content-the task of the grouP. 2. process-the way the group functions. Group process includes such factors as leadership, decision making, communication, and conflict. The content is what is being discussed; the process is how the group operates. These concepts will be covered in Chapter 8. By observing the behavior of group members, one can determine the way a group is functioning. The observer systematically describes group functioning: who talks to whom, who practices leadership behavior, who dominates in team work, and so on. The observations are then summarized and presented to the group. The purpose is to clarify and improve team functioning. It is helpful for the OD practitioner to develop skills in process observation and to learn to be a participant-obseryer, that is, to actively participate and at the same time be aware of group process. Such skills are particularly useful in developing an effective team. Organization Effectiveness Another focus for OD planned change efforts is the organization system. The total organization may be examined by use of climate surveys. Planned change programs are then designed to deal with the specific problem areas identified in the survey. The activities aim at improving effectiveness by structural, technical, or managerial subsystem changes. The objective of such systemwide operations is to increase the effectiveness, efficiency, and morale of total organization functioning. 45 k l. f AtritcipatingChange All of these planned change efforts aim at improving the overall goal attainment of the sys- tem, but each has a specific target or focus for the change program. Organization development occurs when the change effort is focused on the total system. OD may involve individual, group, and intergroup approaches, but it becomes OD only when the total system is the target for change. In an OD program, a set of goals or purposes is identified, and a course of action is undertaken involving the commitment of the members of the organization to its improvement. Summary . . Change. All around us we are confronted with change, and for managers the idea of future shock-too much change in too short a time-can be a very real problem. Managers and organizations face rapid changes in three areas: technological advances, environmental changes, and social changes. The organization must renew and adapt to these changing situations, because every day presents a new set of conditions. Organization Renewal. Most modem organizations feel an increasing need for organization renewal. Renewing management predicts future conditions and makes planned changes before the conditions actually occur. For an organization to have the capacity to adapt to change and become more effective, management must initiate and create a cli- . rnate that encourages creativity and innovation. Adaptive. Organizations may adapt to changes with four different orientations. A sluggish management orientation has little ability to adapt to changes, but there is no great need for it to adapt because the environment is stable. A reactive management orientation has the need to respond to a rapidly changing environment but does not have the ability. A satisficing management orientation has the ability to respond to a changing environment but finds itself in a relatively stable environment. A renewing management orientation has both the ability and the need to respond to a rapidly changing environment. Systems. Every organization must maintain a dynamic equilibrium between stability and innovation. A systems model may be used to identify the sources of impetus for change. The environmental system has an impact on organizations through technological, economic, and cultural forces. Organizational change also comes from forces within the organizational subsystems. Sociotechnical System. An organization can be viewed as an open system of coordinated human and technical activities. The activities consist of five primary components: goals and values, technical, structural, psychosocial, and managerial. Future Shock. Future shock is too,rnuch change in too short a time and can affect managers and organizations. It occurs when there is a greatly accelerated rate oI change. In order to meet the challenges of rapid change, managers need to become more adaptable and flexible. Organization Transformation. This is significanl change to the form and assumptions of an organization. It is typically an unplanned response to crises. Planned Change and Organization Development. Organization development uses planned change td improve the effectiveness of the organization. Planned change can focus on individuals, teams, and the organization. Review Questions 1. What is the implication of organization renewal for today's organizations? 2. Contrast the differences between a stable and a hyperturbulent environment. 3. Compare and contrast the four types of management orientations used in relating to the environment. 4. Using companies who compete with one another (for example, Apple and Microsoft), position them on the adaptive orientation model in Figure 2.2. Support yout position. 5. Explain a sociotechnical system and its five components 6. What lessons can future shock provide for organizations! Key Words and Concepts Client System Closed System Content Contingency Approach Dynamic Equilibrium Entropy Feedback Future Shock Horizontal Corporation Hyperturbulent Environment Open System Organization Renewal Organization Transformation (OT) Participant-Observer Process Observation Reactive Management Renewin gAransformational Management Satlsficing Management Sluggish Management Sociotechnical System Stable Environment System Systems Approach Task Activities Team Process ffiffi&ffiwffiffi ffi Changing the Culture LEARNING OBJECTIVES Upon completing this chapter, you will be able to: 1. Recognize the importance of corporate culture to or_eanizational success. 2. Identify the key factors used in assessing corporate culture. 3' Describe 4' Describe the culture and organizational factors that lead to eff'ective organizations. the major ethical, value, and goal considerations of an oD program. PREMEETING PREPARATION 1. Flead Chapter3. 2' Prepare and read the instructions for oD skills Simulation 3.1. prior to class, form into teams of six select roles. Complete Step 1. 3. Read and analyze Case: The Dim Lighting Co. ar: CREATING A CLIMATE FOR CHANGE Change' massive change' is having an impact on all facets of society, creating new dimensions and great uncertai,t1,. sue facing us today is how to manage change. orga,ization develoime,t provides a renewal process that enables ma::q to adapt their style and goals to meet the changin-q demands of the environment. These crran-{es-improving rr qratity. i"--l ing innovation' adopting a customer orientation--are so fundamental that they usually mean changing th. o.gur.,i...-l Change for an organization is inevitable, and successful organizations are a dynamic engine of change. Executi,:s adapting to changing market conditions and, at the same ti*e, tuJirgth" rr."d to create a.,renewing,,rather than a.,re::j managerial system' Th1v. u1" sea.ching for ways to manage an increasingry complex technology and a more ,opt i,, J workforce' To accornplish these diverse goals, managers need more than piecemeal, ad hoc programs o"atirr: J with current crises' They need long-term-"ffo.t, "trange to prepare for future organizational requirements. In this chaotic *o.. -f only excellent managers will be those who are constantly adapting ,o .hu.rg"-those able not only to deal prou.tir,., I shifting forces, but arso to take advantage of the opportunities that arise. The lessons of management seem to point out that companies with outstancling financial performance ott.n t u, = ] erful corporate cultures' suggesting that "culture" is the key to an organization's success. Changing the culture or on . ql not just happen; ffffi,ffi:. it is usually the result of' a compi-ex change srraregy imprJmented by the .on.,.l In this chapter' we will examine (1) the concept of corporate culture, (2) cultural resistance to change uno ,...rJ bring about change, and (3) ethical, varue, and goar consideratrons of an oD program. UNDERSTANDING CORPORATE 62 CUTTURE I I In today's organization, change leaders are seeking to make a more fundamental shifl in the capabilities of their o.ronrlJ They are not -looking for marginal improvements; their goal is to reinvent themselves. Reinve,ting lies not ln n u..l I 63 Systems2 OD Application: The Culture at Setpoint a -': founders of Se.tpoint Systems had-'o pretty Eood idea of the build lt didn't occur,to they wanted , -. of company culture ll=.n nrith wouid become one of the tnut whai they came up -,:',ouny', most valiable assets' Setpoint is an industrial automation integration'liiLT: , :,ing only about 50 employees Most of its revenues come -;-r Oltiq*ng and building factory-automation-equipment-forits of -,-p;;i;; ii[J non"vur*ll ind Kimberlv-Clark For nranv is that Setpoint builds --.,;;;;, the automatio,, .quipmtni - iiue to fill specific .urio*ti requlrements This requires,exj;;;ny;-li-motivated employees who can solve problem ,= and func.:.-.ontinurf iy look for ways to rmprove pro(esses i-ip"i't his been activelv practicing and open-book.ac:9rTry ,on one occamanagement Joe Knight enI -l- a visitor-touring Setpoint being lecl by CFO working on floor ,--;;;l ten empl"oyees or so or].lhe shop was a whiteOff to the side - - Crnq lralf a dozen ,i.flint' ti- boarcl were about 20 rows and 10 -,ra i.tiiir*ir.rtt sort' -, -,rns of numbers forminq a tabie cf some "What's that?" the visitor asked' . ,:t;"; ;,'i .-,ect i"v*uit, board," Knight said "li's how we track ou.r :'- =.ts ancl figure out whether or not we're making mcney" r:;#;;;ilprrlritg what the numbers were and where '-., .rru-from. Then Knight stopped' "You know" he said' ,iy worC for it' You should get these - - i.rf f, tf-roufAn't trt" it " rie called or-it to one of ,the techni. r .o-iuti you about "irluif"ut ,.-' '- was on introrjuced him, and asked him to explain what - -:Oafd. --Isur.," oi otYefnumber in mind. He said ihai he ;rsl "' -:-:: .-='a:D c/p' )' j L-'::. - r= -' =:: "Cfn; he all gross prof it to operaiing ::= : -,-. . - iikgd knew if the company was nraking mone;' . ie .: = to see il runnlng at aboui 2.0 "lwasiust amazed," the vrsitor recaiieo a':- -: {f:sw : le that board inside and cut He ktrew every n,uT"er -was and where ihe'; r':l:3 knew exactly rruhere the company ittention. There was no hesitation",He haci q'-=al focus ttreir .onlil.n.. in what was up there' Icould see that the bcar.c *ri' , .r,.iitneJ porr"rrion, and I was so impressed' not thtl j". rriqLt understood it, but that the people on the shop i["] rrri ii Jo*n like thai. it was their scoreboard'.l1ryas :fe ;; th;; could tell i{ thev were winning ot losing. I talked to alti,"rerut o+ ttl**, and lluit couldn't get over the positive irC* *n"v had and their u.nderstandinq "f ?-'"tii:::^"-1"-" conKnight his been so st-iccessful in explaining accountlng nonaccountants that he has co-auihoreci ul??k :n ."pi, to to tire suniect, Financial lntelligence A Manager's Guide "irr*ii"*nar Really Mean' published bv Numbers ie Harvard Business School Press' - -reasons Companies are bought for a irmited lumb,er of for the boitom Yet Setpoini has an asset that is worth something would be wiilrin*. iriorqL it is hard to value, some companies price for a particular type of (orporate ,.t o, p#, substantiai .rTtrL *nfia thorouqh attention to the financials' Questions 1, the young man said and proceeded to irualk them --'-,gh it. He talked aboui calcutaling the gross profit that he week on each proj. , 11, *tt*rsues hacl earned the previous each project's gross .-- -," ,"i"i-O ,"t the col,'rrnn showing that - ' . pJr-f.orr ancl explained the imporiance of k'eeping .:ing the cLlffent way of doing business" but ir.r 2. :. Companles is rt reasonable io expect other manula{turlng has develable to tluplicate the culture that Setpoint to n" oPed? SuPPort Your Posltlon' Can culture be bcuqht? Wnut dangers t*oJl,l SetPol nt ? ' creating totally new approaches' new tech- :les. and new tnarkets" organizational culture c&n no longer be efGiven an environrnent of rapicl chal'r